Books to Read
If you are interested in learning more about Algorithmic Trading; I strongly recommend starting with the below books:
If you want to continue your study in Algorithmic Trading – I sincerely recommend you start off with Kevin Davey’s “Building Algorithmic Trading Systems”. Now although the book is called “Building” – it’s actually mostly about “Testing” algo systems – and if you have read this far, you should know that I believe testing to be one of the most important things to get right in this field.
This book is easy to read and follow even for beginners and can help you gain a lot of awareness of what makes a good backtest and avoid common mistakes – and thus lay a solid foundation for the rest of your journey in algo trading. A must-read in my opinion.
While you’re at it, you can also check out more books by the writer – he posts free content on Youtube occasionally and offers free ebooks which are very information as well
The Evaluation and Optimization of Trading Strategies
Another book focused on the testing side of things. You can read this after Kevin Davey’s book above as this really goes more in-depth on how to test your systems and optimize them. In my opinion this book can get a bit high-level so maybe can save this till we get more experience.
Algorithmic Trading: Winning Strategies and Their Rationale
This book also touches on testing a bit, but it also offers a breakdown of several common strategy concepts: mean-reversion, trending and intraday momentum, what they mean, and how they work.
IT further breaks them down into quite technical detail – if you are just starting out on MT4, you probably don’t need to go THAT in-depth, but it still is a good place to think about generating strategies itself.
This book also uses MATLAB for most of its examples, so it would be better if you moved on to other platforms from MT4.
Quantitative Trading: How to Build Your Own Algorithmic Trading Business
You can also check out books by Ernest Chan, who is a very authoritative figure on this subject. This book covers most of the important subjects of algo-trading as well – including generating ideas, backtesting, as well as how to treat algo-trading as a proper business.
Once caveat is this book uses MATLAB for most of its examples and thus is more useful if you know MATLAB and less applicable if you are just starting out on MT4, but even without the specific code examples, the main concepts and principles itself is worth it if you want to take your algo trading to the next level.
Tools and Software
Tick Data Suite
Going into Algorithmic Trading is committing yourself to trade using fully automated systems. How do we know which systems work? By Testing.
This is why most of your time will be spent testing a system in one way or another – and in a world where testing matters so much to your success, the raw data which you use for your testing is going to be super-important.
The default data that comes with MetaTrader only supports 90% modelling quality – without going into details – you can intuitively interpret that historical data as being right 90% of the time. This isn’t nearly good enough – in contrast, Tick Data Suite (TDS) provides 99% modelling quality.
In addition, it also offers a few additional options that is very useful to testing : a Variable Spread option so your test data will use the historical spread instead of a spread figure you arbitrarily choose yourself; and also multiple ways to factor slippage into your testing to make it more realistic. After all- a test conducted without due care to commissions and slippage is not a test worth looking at.
The best thing about TDS is how it seamlessly integrates into the MetaTrader interface and how easy it is to download the different forex pair data and manage them. For someone starting into algo trading seriously, you cant go wrong with this software.
It’s quite affordable at only 10 USD / month, but there’s also a free trial available for those who wants to test it themselves.
fxDreema
Don’t let the rather dated look of this website fool you – it’s a very, VERY good EA builder that can help you put together some really good robots if you take the time to learn how to use it and if you don’t want to actually learn the MQL4 programming language. It’s pretty much the most common go to EA-builder now.